An Icelandic gunboat has opened fire on unarmed British fishery support vessels in the North Atlantic Sea, it is reported.

The violent clash left the Icelandic coastguard ship, Thor, badly damaged but the three British vessels involved appear to be unaffected.

The Thor is said to have tried to arrest the British Star Aquarius
and her sister vessel the Star Polaris as they sheltered from a force nine gale within Iceland's 12 mile territorial waters.

They were taking water and supplies from the Lloydsman, an ocean going tug, and the practice is normal for a vessel in distress.

Confused reports

The Royal Navy said Thor moved alongside the British vessels and signalled the Star Aquarius, an oil rig supply vessel of the Ministry of Agriculture, Fisheries and Food, should stop or she would shoot.

Reports are confused about which vessel then struck the other but as the Thor broke away the Lloydsman surged forward to protect the Star Aquarius.

Captain Albert MacKenzie of the Star Aquarius said the Thor approached from the stern and hit the support vessel, before it veered off and fired a shot from a range of about 100 yards.

But Niels Sigurdsson, the Icelandic Ambassador in London, said the Thor had been firing in self-defence after it had been rammed by British vessels.

'Grave matter'

The incident comes at a diplomatically sensitive time as foreign secretaries from both countries are attending a two-day Nato conference in Brussels.

Foreign Secretary James Callaghan has criticised the incident and Einar Agustsson, the Icelandic Foreign Minister, said it was a very grave matter.

Both men are due to meet and discuss the cod war which has been plunged into disarray following today's incident.

Iceland has said its decision to allow British fishermen an annual 65,000 ton catch in its territorial waters is non-negotiable.

But Britain is demanding an annual catch of 110,000 and is hoping to broker an agreement somewhere between the two figures.